Mongolia opens new freight railway to China as countries develop trade ties

Mongolia has opened a new 227km freight rail link from Zuunbayan to Khangi on the Chinese border for exports of coal, iron ore, and copper. The new railway is expected to boost Mongolia’s freight export volume by 30% according to the Mongolian Prime Minister. China is Mongolia’s main trade partner, accounting for 83% of its exports. In recent years, both countries have been working to tap into Mongolia’s vast coking coal reserves, investing in rail infrastructure and mining capacity while agreeing new supply deals. Mongolia’s coal exports declined considerably from 2021 to May of this year due to Covid-19 restrictions on cross-border trade. Trade has since recovered, rising to 23.1 MMT from Jan-Oct 2022, an increase of 66.7% YoY according to the National Statistical Office of Mongolia. We expect this increased rail trade, as well as growing domestic mining capacity in China, to considerably reduce China’s seaborne coal imports in the coming years. China’s seaborne imports totaled 25.8 MMT from Jan-Nov 2022, a decrease of 22% YoY.

Brazil exports first corn cargoes under China phytosanitary deal

Bulkers have started shipping Brazilian corn to China, following the finalization of an agreement between the countries in late October that allows over 100 certified Brazilian companies to export corn to China for the first time. 1.1 MMT of corn has been loaded in Brazil for export to China since October. Almost all these volumes are being shipped on Panamaxes, along with 2 Supramaxes. Certifying Brazilian imports remains complicated, however, and several ships are reportedly being fixed with the option to redirect to another Asian country if the required certification to discharge in China is not received in time. Chinese buyers have been seeking cheaper alternatives to US corn to replace Ukrainian imports that have stopped since the war. China imported 8m tonnes of Ukrainian corn in 2021. Since March, almost all Chinese corn imports have come from the US, totaling 14.2 MMT so far this year. With Brazilian corn sold at a discount to that from the US, we expect to continue to see Brazil grab a larger share of Chinese corn imports, particularly with Ukraine still out of the picture for the most part.

EU iron ore imports fall to lowest level since 2020 in November

The EU’s imports of iron ore totaled 5.7 MMT in November, down 9.6% YoY and the lowest monthly level since August 2020. According to data from WorldSteel, EU countries’ steel production fell 17% YoY in October. The sector has been hit by high energy prices and waning domestic demand amid an economic slowdown, forcing mills to reduce output or close completely. Imports from South Africa saw the biggest decrease, falling by 48.2% YoY to 680,000 tonnes in November. South African ports experienced significant disruptions last month following a train derailment. This has hit demand for Capes and Panamaxes, with volumes falling by 18.3% YoY to 3.2 MMT and 7.9% YoY to 1.8 MMT, respectively. Supras, on the other hand, have seen volumes increase by 24.6% to just over 1 MMT. This has been driven by shipments from Liberia and Mozambique, which totaled 350k and 270k on Supramaxes respectively.